Trump Promises New Tax Plan Won’t Affect 401(k) Plans

On Monday, President Donald Trump denied reports that the Republican tax plan currently currently being considered by Congress would reduce the amount of pre-tax dollars Americans are permitted to contribute to their 401(k) retirement savings plans.

“There will be NO change to your 401(k). This has always been a great and popular middle class tax break that works, and it stays!,” Trump tweeted.

Trump’s declaration followed reports that Republicans were considering altering when employer-provided retirement plans such as 401(k)s are taxed. Under current law, employees contribute to those plans prior to paying taxes on the money and will be taxed upon withdrawal of the funds.

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According to the Washington Examiner, Congress might revise the law so that employees’ contributions would be taxed upon deposit. Taxes would not be assessed upon withdrawal, making the plans function somewhat like today’s Roth IRAs.

There will be NO change to your 401(k). This has always been a great and popular middle class tax break that works, and it stays!

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Such a strategy would shift a lot of tax revenue from future years to the present.

Reports also circulated claiming that Republicans are considering lowering the annual cap on pretax contributions from employees, possibly from the current $18,000 for those under age 50 to as low as $2,400, according to Fox News.

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Although a change in contribution allowances might help offset the Republicans’ proposed tax cuts, experts in the financial industry warned that such a significant revision to 401(k) laws could discourage people from saving for retirement.

Additional criticism of the Republicans’ plan has come from Democrat opponents who claim that it would favor the wealthiest Americans.

Appearing on “CBS This Morning” on Sunday, Speaker of the House Rep. Paul Ryan of Wisconsin insinuated that Trump wanted to create a fourth tax bracket for high-income individuals to ensure the middle class gained more benefit from the new tax plan than the wealthy.

In an exclusive interview with Maria Bartiromo on Fox News’ “Sunday Morning Futures,” Trump confirmed that Republicans were considering such a move, but said he would “rather not” add that bracket.

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“But the only reason I would have — and (Rep. Ryan) does say this, he’s very plain in what he said — is if, for any reason, I feel the middle class is not properly being taken care of,” Trump said.

Trump continued to praise the tax plan, telling Bartiromo, “It’s going to be a great bill.”

The proposed plan aims to reduce taxes for workers and businesses, lowering the corporate tax rate from 35 percent to 20 percent, and decreases the number of personal tax brackets from seven to three or four.

Trump is eager to sign his tax reform plan into law.

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“I want to get it done by the end of the year,” Trump said, “but I’d be very disappointed if it took that long.”